MSM Exclusives

Know Your ABCs: Factors That Determine Self-Storage Asset Class

Written by Kerri Fivecoat-Campbell | Mar 5, 2024 3:49:25 PM

The self-storage industry has exploded in the past two decades. As the industry has grown, the types of self-storage facilities have evolved as well.

 

Gone are the days when many jurisdictions will allow the single-story metal buildings with roll-up doors that were prevalent through the 1980s and into the end of the century. Developers within the industry, as well as city and town governments, treat self-storage more like retail centers; some even require mixed-use development.

 

However, there are differences of opinion as to what exactly distinguishes a Class-A facility from a Class-B or a B to a C. Here’s what the experts have to say and why it matters.

 

Class-A Facilities

“A Class-A facility comes down to location first and whether it is institutional quality,” says Todd Amsdell, president and CEO of Cleveland, Ohio-based Amsdell Companies, which operates facilities as Compass Self Storage. “It may not mean a REIT is managing it.”

 

Amsdell adds that location doesn’t just mean a highly visible facility on a main thoroughfare. “The market really dictates whether there is a Class-A facility in a particular location,” he says.

 

Anne Mari DeCoster, president of Kingdom Storage Partners and Self Storage Investing in Scottsdale, Ariz., says the first determining factor for a Class-A facility is whether the property is in one of the top 100 MSAs with the largest urban concentrations. “Rural self-storage properties are not going to be Class A,” says DeCoster.

 

Class-A facilities in these markets typically are built with higher grade building materials, have at least some climate-controlled units, provide the latest in touchless renting and security options, utilize plenty of cameras, are well lit, and have wide drives. Multi-story buildings also include easily accessible loading bays and typically multiple elevators that only allow tenants to access the floor(s) their units are on.

 

Alex Burman, global director of acquisitions for StorageMart in Columbia, Mo., agrees with DeCoster. Among the determining factors for a Class-A facility in a highly visible urban area for his company is that the location must see a traffic count of at least 15,000 vehicles per day. “It must be on a hard corner or on a major thoroughfare, think where a fast-food location would be, or a Walgreen’s,” says Burman.

 

Location is just part of the equation. Age is the second factor, according to many experts. “If you have something that’s more than 20 years old, it likely won’t be a Class-A [facility],” says DeCoster. “Those are likely all drive-up and can’t really be considered Class A.”

 

While the experts say Class-A facilities don’t have to be multistory, many are. “Most of the modern self-storage facilities are multistory, but they don’t have to be,” says Ann Parham, CEO of Joshua Management, a division of The Parham Group in Bulverde, Texas.

 

Adam Pogoda, president of Pogoda Companies in Farmington Hills, Mich., says even older drive-up buildings can be Class-A facilities. “I think it has more to do with the amenities,” he says. “There are drive-up properties that have no key locks, plenty of cameras, lots of lighting, and electronic gates.”

 

For Pogoda, it’s all in how the older properties have been maintained. His company has a multilevel property in Michigan that was built in 1999 that he still considers a Class-A facility. “It’s been maintained really well through the years, getting freshly painted floors, refurbished asphalt, and is kept fresh.”

 

Pogoda says several other things can make an older property a Class-A facility:

  • Landscaping and cleanliness
  • Signage
  • A visible front office
  • Modern and maintained roofs and doors
  • A modern, up-to-date website that allows customers to do it all from the convenience of their homes

“You can actually make your Class-B look like a Class-A online with a well-designed website,” says DeCoster.

 

Class-B Facilities

Once again, location plays a part in determining a Class-B facility, not only if the facility fits into a higher density urban market but where in that market it is located. “Class-A facilities are in the lowest risk areas and of the highest quality,” says Stacie Maxwell, vice president of marketing and training at Universal Storage Group in Atlanta, Ga. “Class-B are in higher risk areas.”

 

Class-B facilities likely don’t have the security set up or maybe even lack touchless access with hard lock doors and fewer security cameras. Class-B facilities may be located on gravel, but there’s typically still some sort of wall or fencing with gate access.

 

“Class-B facilities may also be positioned wonky with regards to access,” says Burnam. “The building may be hidden from a main road and access may be from a side street.”

 

Pogoda says Class-B facilities are still well-maintained and may have some climate-controlled units. “Class B is really a catch all—everything that’s in between an A and a C,” says Pogoda. “It can be an A or a B-plus with some upgrades.”

 

Class-C Facilities

Many of what would be considered Class-C facilities in urban areas have been modernized to at least Class-B status. Experts agree Class-C facilities are typically older, first- or second-generation facilities, usually located in a secondary or rural market. They are distinguished by being drive-up, non-climate-controlled metal buildings.

 

They are considered “mom-and-pop shops,” operated by individuals or a couple. “They likely don’t have fences, good lighting, or security,” says Parham. “And sometimes, there’s no manager anywhere around.”

Burnam says they are also typically smaller properties of less than 15,000 square feet and may not even offer paved drive aisles.

 

Who Cares About Facility Classes?

When looking at the class of self-storage facilities, there are two perceptions that may matter:

  • Investors - “I think whether it is a Class-A, -B, or -C [facility] is a spin to investors,” says Pogoda. “It matters to them if your property is for sale or you’re buying.”
  • Tenants - Pogoda continues, “I don’t think the average customer cares whether it is an A or a B if the facility is clean, well-managed, and safe. But they will care if it is a C.”

 

DeCoster believes the most important aspect is whether the facility is well-managed. “If it is an A and is poorly ran, it can be downgraded pretty quickly,” she says.

 

Burnam adds, “Once inside the unit, it’s three walls and a door. We are basically selling the amenities to make it easier. In the end, that’s what the customer cares about.”

 

 

Kerri Fivecoat-Campbell is a freelance journalist based in the Ozark Mountains. She is a regular contributor to Messenger. Her business articles have also appeared in Entrepreneur, Aol.com, MSN.com, and The Kansas City Star.

 

Read more about Class A self-storage facilities and how to build one.